CCTV Investigation Targets Chinese Drug Maker

China’s drive to root out corruption in the pharmaceutical industry turned inward after its state-run broadcaster accused a unit of Sino Biopharmaceutical Ltd. of bribery, the first high-level accusation to be aimed at a listed Chinese drug maker.

People walked outside the Hong Kong Stock Exchange.

Associated Press

Shares of the Hong Kong-based company slid as much as 25% Thursday after China Central Television aired a report alleging the company’s largest subsidiary, Jiangsu Chia Tai Tianqing Pharmaceutical Co., offered overseas vacations to doctors to boost sales. Shares were later halted from trading at the request of the company, which said it planned to issue a statement to clarify information in recent news reports.

The pharmaceutical industry has been under scrutiny in China, though until now the government has focused on foreign drug makers. Authorities in July accused U.K. drug maker GlaxoSmithKline PLC of bribing doctors, hospitals and others to prescribe medicine and taking bribes of their own. GlaxoSmithKline later admitted that some of its executives in China may have broken the law and said it is cooperating with authorities in the investigation.

Authorities also have launched investigations into French drug maker Sanofi SA for alleged bribery in the Chinese market. The company has said it is cooperating with authorities.

Analysts reacted grimly to CCTV report. Credit Suisse downgraded Sino Biopharmaceutical to underperform from neutral, saying the allegations confirm worries that China’s drug bribery probe would also ensnare Chinese companies. Worsening the situation, the investment bank said, is that Sino Biopharmaceutical doesn’t have any major drug launches slated for the next few years.

“Sino Biopharm is facing probably the most difficult time in its history. The reports in China’s most influential media will have quite a negative impact on its performance in the near term,” Credit Suisse said.

The first year of new Chinese president Xi Jinping’s tenure has featured a major campaign against corruption in the country. Last month, state media named three executives at PetroChina Co. and one at its parent company, China National Petroleum Corp., as targets of a corruption probe. All four stepped down from their posts.

Representatives of the European Union Chamber of Commerce in China recently urged the country to take a balanced approach in its crackdown on the drug industry, noting that recent Chinese investigations have homed in on foreign firms. A crackdown on foreign firms that intends to change or “create a special climate” won’t work, said Bruno Gensburger, the European Chamber’s pharmaceutical chair and an external relations director at Sanofi, at a press briefing earlier this month.

–Laurie Burkitt in Beijing and Isabella Steger in Hong Kong contributed to this article.